Principles of NEC

1. Principles of NEC Dennis Li - HKCIC Lecturer

2. About Me

3. Lecture Outline

4. Lecture Outline

5. Lecture Outline

6. Lecture 1 Introduction to NEC • Background of NEC • Characteristics of NEC • Terminologies • Comparison between GCC and NEC

7. Background of NEC • https://www.youtube.com/watch?v=L7RUXQ8DJRY • Official website: www.neccontract.com

8. History of NEC • The 1st NEC – then known as the “New Engineering Contract” – published by ICE in 1993. It was a radical departure from existing building and engineering contracts, being written in plain language and designed to stimulate good management. • The 2nd edition, called the NEC Engineering and Construction Contract, or ECC, appeared two years later.

9. History of NEC • NEC Contract Suite (3rd Edition) was launched in 2005 which included: • Engineering and Construction Contract (ECC) • Term Services Contract • Framework Contract • Professional Services Contract • Supply Contract • Subcontract • etc

10. History of NEC • NEC4 is launched in June 2017!

11. What’s the difference between GCC and NEC?

12. Characteristics of NEC What are the problems with traditional contract (GCC)?

13. Black & Veatch Characteristics of NEC - Clarity Plain English and present tense are used in the contract language, e.g. • Cl. 15.1 The Employer and the Contractor give an early warning by notifying the other as soon as either becomes aware of any matter …. Key contract specific information is contained in Contract Data and written in italicsin the Contract. Defined terms have capital initials. Cross-referencing of different clauses is minimized.

14. Black & Veatch Characteristics of NEC - Flexibility A number of main options with different payment mechanisms e.g. lump sum, re-measurement, reimbursable; A number of pre-set secondary options for project proponents to “pick and mix”.

15. Black & Veatch Characteristics Contract has formal requirements to enhance management • Partnering – Parties are expected to work collaborativelyas part of the contract requirement • Early warning mechanism – either party is required to raise the early warning to the other if they are aware of any contractual matter arising • Time control – There are defined period for reply to drive communication and problem solving

16. Black & Veatch Characteristics Contract has formal requirements to enhance management • Programme management – There are detailedrequirements on programme. Employer shall respond with either acceptance or non-acceptance with reasons provided. • Change management – Change is valued based on what reasonably costs the Contractor to carry out the unexpected scope of work. Therefore, he will not get a windfall or suffer dramatically because of a change.

17. NEC3 Contract

18. Documentation

19. the Project Manager and Supervisor Time Project Manager’s roles Supervisor’s roles Cost Quality

20. NEC3 Contracts and Options Engineering and Construction Contract (ECC) 6 main pricing option clauses are: Option A: priced contract with activity schedule Option B: priced contract with bill of quantities Option C: target contract with activity schedule Option D: target contract with bill of quantities Option E: cost reimbursable contract Option F: management contract

21. Secondary Option Clauses (optional) Usually Adopted in HKSAR Government NEC Contract Option X1 – Price adjustment for inflation Option X2 – Changes in Law Option X3 – Multiple currencies Option X4 – Parent company guarantee Option X5 – Sectional Completion Option X6 – Bonus for early Completion Option X7 – Delay Damages Option X12 – Partnering Option X13 – Performance Bond Option X14 – Advanced payment to the Contractor Option X15 – Limitation of Contractor’s liability for his design Option X16 – Retention Option X17 – Low Performance damages Option X18 – Limitation of liability Option X20 – Key Performance Indicators (not used with X12)

22. Option Z (The Z Clauses) • Used to incorporate bespoke clauses, i.e. security, Health and Safety etc; or • To amend the core and main option clauses.

23. Contract Data • Part 1 Employer, Part 2 Contractor • Important that contract data fully completed , affects operation of the contract • Defines the details of the contract, identified by italics

24. Terminologies Cl. 11.1 - In these conditions of contract, terms identified in the Contract Data are in italics and defined terms have capital initials. Exercise on change in terminologies

25. Contract data Exercise on contract data

26. The Key Players • Provide Access • Provide something stated under the Works Information Employer • Manage the contract • Gives Instruction to change the Works Information • Gives an early warning • Certifies Completion • Accepts the Programme or notifying reasons for not accepting • Instruct to stop work • Assesses the amount due • Certifies a payment • Notifies compensation event • Assessing compensation event • Accepting or not accepting Subcontractor • Assessing additional cost incurred for work not meeting Condition stated for a Key Date • Others…… Project Manager

27. Contractor The Key Players • Notifies test sand inspections • Instruct to search for a Defect • Notifies each Defect • Issues Defects Certificate Supervisor • Provides the Works in accordance with Works Information • Design as required • Co-operates with Others • Manage subcontracting • Gives early warning • Submits and revises programmes • Notifies tests and inspections • Corrects a Defect • Notifies compensation events • Submits quotations for compensation events • Others